5 Takeaways From the Land Investment Expo

On Tuesday Jan. 14 Peoples Co. hosted the 17th annual Land Investment Expo at the Iowa Events Center in downtown Des Moines, Iowa. In case you missed it, below are five of my takeaways from the conference.

1. You Could Lose Money on a Solar Contract

During the morning breakout session I sat in on “Deploying Solar on Farmland: A Deep Dive into Business Models.” A variety of considerations for joining a solar project were discussed but the one that stuck out to me the most is if you own highly-productive and valuable farmland, such as in the Corn Belt, if you don’t negotiate the right lease amount, you could lose money in the long run.

Dave Muth, director of capital markets at Peoples Company, said when negotiating a solar lease agreement it’s important to consider how much you would expect the land to be worth at the end of the lease term if you had kept farming it. Then make sure your annual per-acre payment equates to that value plus what you would have made over the length of the lease renting it out at market value.

He said the tricky part is there isn’t enough market data to know if land under solar panels will appreciate at the same rate it would being farmed.

“We’ve been looking for data on what happens to soil quality and some of those core productivity metrics after a high-producing piece of farmland has been in solar for 40 years, and it just candidly doesn’t exist,” he said.

That said, he also said he suspects land under solar for 40 years won’t be as valuable when the lease expires as it would have been if it had been farmed for 40 years.

“It’s going to take a while before that produces the way that farmland does, for a lot of reasons from a fertility, soil biology, soil health standpoint,” he said. “But that’s the piece that we don’t know.”

2. China’s Population Decline is for Real

One of the morning’s keynote speakers was Cliff Kupchan, chairman of the Eurasia Group, which is “devoted exclusively to helping investors and business decision-makers understand the impact of politics on the risks and opportunities in foreign markets.”

In his presentation he provided perspective and predictions on situations around the world such as the war in Ukraine, Iran’s nuclear program, and the future of India’s economy.

During Q&A, an attendee brought up that despite the fact that China’s population is forecast to drop significantly by the end of the century, the issues doesn’t seem to get a lot of attention.

Kupchan’s repsonse? “The end of this century is a long time from now.” But what stuck out to me was he affirmed this is a “massive issue.”

“I think the reason though … policy communities have their heads in the sand [is] … China’s still very powerful right now, with a mean, quite assertive, and vicious government,” he said. “And so I think the community’s more focused on that, but is incorrect not to focus on the issue and its implications more.”

He also said China’s President Xi Jinping is looking to use artificial intelligence instead of human labor “wherever he can.”

“But the numbers are the numbers,” Kupchan said. “The Chinese face a huge demographic problem and won’t be the country that they are now for a very long time.”

3. The U.S. Has Less to Lose in Tariff Negotiations Than Our Neighbors

Lunchtime keynote speaker Richard Vague, author and economic futurist, offered a presentation titled “Tariffs and Our 250 Years of Internal Battles.”

Early in his presentation he offered some encouragement to a room full of people who were likely concerned about the possibility of trade wars under the new Presidential administration.

“Neither Canada nor Mexico can stand up to tough negotiations with the U.S.,” he said. “The U.S. imports far more from both than it exports, and therefore has far, far less to lose in any dispute. Canada’s exports to the U.S. are a whopping 19% of its GDP while U.S. exports to Canada are under 2% of its GDP. Likewise, Mexico’s exports to the U.S. are a whopping 33% of its GDP while exports from the U.S. to Mexico are under 1.5% of its GDP. Further, 75% of Canada’s exports and 80% of Mexico’s exports go to the U.S. Neither of those two countries can remotely afford for their terms of trade with the U.S. to go sideways.”

He went on to say, “No one knows better than the people in this room that this equation is very different at the state level, with agriculture-centric states, like Iowa, disproportionately impacted by import and export policy. But at the national level, the equation is overwhelmingly in the favor of the U.S. Given the disparity, the new negotiations with both Canada and Mexico could go quickly, and will likely be decisively in the favor of the U.S.”

4. China Is “Much More Complicated”

When it comes to trade negotiations with China, however, Vague said things are “much more complicated.”

“Yes, we import much more than we export, but our dependency on China is greater,” he said. “After we allowed China into our global trade agreements decades ago, we simply lost much of our manufacturing expertise and handed most of that to China. So restructuring trade with China, much less taking the drastic step of shutting it off, will be a perilous exercise. But what is at stake is monumental.

“It is nothing less than the global marketshare and industry leadership in essentially all the industries that will take our world into the future. … What are those industries so critical to the future? Telecommunications, electric vehicles, artificial intelligence, solar power, genetic engineering, super computing, advanced military weaponry, drones, … and much more. While we were paying too little attention, China, through its massive central government planning and investment, has overtaken us in industry after industry.”

Despite characterizing China as “the most import-dependent major country in the world,” Vague said China is focused on sources for agricultural goods outside of the U.S. He told the agricultural exporters in the room, “the time is now to begin developing other export markets.”

5. “Make Minnesota Iowa Again”

Something that was definitely not on my bingo card for the day was a surprise appearance from Iowa Sate Senator Mike Bousselot to tout his plan for Iowa to buy the bottom nine counties of Minnesota.

He framed it as an opportunity to grow Iowa’s population and to “Make Minnesota Iowa Again,” as he went on to explain several of the nine counties in questions were originally part of the Iowa Territory.

Given the number of audience members who laughed at his announcement, I am sure I wasn’t the only one who thought this was a joke or some kind of political stunt at first.

“You laugh at first, but when you hear the pitch, you’ll realize that this is the real deal,” he said. “It’s a real land deal. And on top of that, it’s a sign of things to come because every single Minnesotan who becomes an Iowan would immediately have lower taxes, lower income tax, lower sales tax, lower business tax, [and] lower property taxes.”

As of this writing, no formal bill text has been made public, so I guess only time will tell if this land deal will see its closing date.